Land costs have outpaced rise in home prices

New study by DTZ has found the price of land out-stripping rise in home prices in recent years. Developers are still bidding for sites aggressively due to the fact they have exhausted their existing land bank. With more new players coming into the market, competition is expected to be more intense. The average cost of land sold in government tenders has more than doubled in the last five years from $310 psf of gross floor area (2008) to $656 psf in the first half of this year. This implies an average compound rate of 18.2 percent compared with 9.1 percent for HDB resale and 5.2 percent for private property prices.This is on the backdrop of salaries which has risen at an annual compound rate of 5.3 percent for the average household and 6.2 percent for the top 10 percent of earners. On top of this: the gap between minimum offers and the winning bids have been widening. So far, this higher cost has been passed on to the home buyers, amidst all the cooling measures. It could be worrying if the increase in the landcost is not matched by the fundamentals.

Short Term Gold correction

Gold is correcting downwards with the following indicators: 1650, 1600 (1590), 1550
There is some evidence of de-leveraging from gold into fiat currency either from Europe or US. A combined factor of good news from US and not so good news from Europe will entice people out of gold and into US dollars.

As of friday close, the Straits Times Index (STI), at 3163.56, had generated a year-to-date gain of 19.5%. Taking into account dividends of the 30 stocks, the total return of the STI was boosted to 23.1%.

From SGX's website: a total of 25 STI stocks are currently in the Green for 2012, with five stocks in the Red.

 

"Performances of these STI stocks in the year to date are as follows:

• Financial STI stocks are made up of three Banks, five Real Estate stocks, a REIT and a diversified financial, Singapore Exchange [S68], which gained 13.9%. Four of the five best STI performers were Real Estate Stocks, CapitaMalls Asia [JS8] gained 70.4%, Capitaland [C31] gained 65.6%, Global Logistic Properties [MC0] gained 56.7% and HongKong Land [H78] gained 54.4%. City Developments was the sixth best performing STI stock generating a gain of 44.7%. The STI’s REIT CapitaMall Trust [C38U] gained 24.7% or 31.17% taking into account dividends. DBS Group [D05] gained 29.3%, UOB [U11] gained 29.2% and OCBC [O39] gained 24.1%.The broader FTSE ST Financials Index gained 36.3% over the year thus far after declining 23.4% in 2011.

• All six of the STI Industrial stocks, like the Financial stocks, are in the green in the year thus far. Industrial stocks saw Fraser & Neave [F99] gain 56.5%, Singapore Technologies Engineering [S63] gain 41.3% and Jardine Matheson Holding [J36] gain 31.2%. The next tier of price performances saw Jardine Strategic Holdings [J37] gain 28.7%, SIA Engineering [S59] gain 25.4% and Noble Group [N21] gain 2.7%. The broader FTSE ST Industrials Index has gained 26.6% over the year thus far after declining 18.5% in 2011.

• The two STI telecommunication stocks saw Starhub [CC3] with a gain of 29.6% outpace the Singtel [Z74] gain of 10.0%. The FTSE ST Telecommunications Index gained 11.4% over the 2012 year thus far after gaining 5.0% in 2011. Starhub is the ninth best performing STI stock of the year thus far.

• The three Oil & Gas stocks, saw SembCorp Industries [U96] gain 29.1%, SembCorp Marine [S51] gain 20.2% and Keppel Corp [BN4] gain 16.9%. The broader FTSE ST Oil & Gas Index has gained 22.2% in the year-to-date after declining 17.4% in 2011.

• Consumer Services stocks of the STI were mixed. These five stocks were led by ComfortDelGro [C52] which gained 23.3% and Singapore Press Holdings [T39] which gained 9.5%. Singapore Airlines [C6L] gained 8.0%, Jardine Cycle & Carriage [C07] marginally declined 0.1 % and Genting Singapore [G13] declined 10.3%. The broader FTSE ST Consumer Services Index gained 3.9% over the 2012 year thus far after declining 18.8% in 2011. Consumer Goods stocks of the STI declined, Golden Agri-Resources [E5H] declined 11.2%, Olam [O32] declined 27.0% and Wilmar [F34] declined 35.4%. The broader FTSE ST Consumer Goods Index declined 19.8% after declining 18.8% in 2011."       

Property talk for 2012 and 2013

Property prices in recent months, have continued unabated- though it has slowed. Recap the year 2008? When US was suffering from recession (the aftermath of the housing bust), Singapore market dipped only alittle and shot up from there. And it seemed that it has not stopped for a rest since then.

Consider also the year 2011, buyers from China were the biggest group of foreign property buyers in Singapore outwinning Indonesians, our traditional foreign buyer at the number 1 spot. But what happens if foreigners were to stop buying Singapore properties? Will it be rosy?

Since interest rates are at a historical low now, it can only go up, and not down. In fact, interest rates on home loans can shoot up easily, as has in the past, to 3 per cent to 4 per cent. And the possibility of that is real, as US will probably have to contend with huge inflationary pressure in the months to come. But then again, the possibility of that being translated to a huge increase in property price also remains. And then you probably have the worst of two worlds: High Property prices and High interest rates. Owners who cannot foot the bill may not be able to hold on. But with Singapore hinging on to China, we should be fine. Realise that I did not say US but yes, surprise, surprise... the whole Asia,whether you like it or not, depends on China now. China has been doing the right thing with her economics and is expected to continue.

On Singapore's front, more than 30,000 condominium units will be completed in the next two years. We are left with the question of whether the increase in the number of units can cause the price to drop, in the situation that overseas funds are flooding the market. Its hard to say.

But if the property price increases irregardless, rentals might not decrease as people who cant purchase a unit can only resort to renting for a roof over their head. But if property price decrease, rentals will likely go down since its now easier to own a place... I suspect the decrease to be minimal though, especially if it is to be a case of rampant inflation.

Even when you consider the following: HDB built 8,000 units in 2008. This did not stem the increase in hdb price then. But in 2011 and 2012, HDB is going to build 25,000 units in each year, totaling 50,000 units in the span of two years. In 2011, hdb price also increased. It remains to be seen what will happen to hdb price at the end of 2012. With supply of both condominiums and HDB flats expected to surge in the next two years, this makes the case of HDB flat price dropping a real possibility but not an eventuality.

According to Yu Kam-hung, a Hong Kong-based senior managing director for valuation and advisory services in Greater China at CB Richard Ellis Group Inc., said, "Property prices will start to decline soon and we are likely to see that in the rest of the year." He reportedly added that "Prices will trend down by about 10 per cent in the next two years and I don't rule out the chance that they may fall as much as 20 per cent in the worst case scenario."

It will be most prudent to consider worst case scenarios when planning for the future, especially one that involves a roof over your head, however.

Falling...

Gold rallied to its highest in the first month of January after Euro finance ministers agreed to a 130 billion euro rescue for Greece. This received more upward momentum when China recently cut its required reserve ratio and committed to help the euro bloc. Gold already received a strong boost after the U.S. Federal Reserve last month said it would keep rates near zero at least
until late 2014. However it faced strong resistance as liquidity tightens for European banks. This was later witnessed in a one day "rout" last week when it surrendered a two weeks gain. According to technicals, it nevertheless remains short term bearish.

Trends

Gold is going downwards, as expected. It is now at the 1645 level, as of 18th Jan.

gold in new year rally mood

gold indeed rallied up at new year.. but faced resistance at around 1655 and would retreat downwards. The next level to look out for: 1625.

Gold might rally on the last trading day of the year..

The upwards "rally" has begun and hit "1575" at 11.30 pm. However, the major trend change isnt broken. The upsurge might attempt to break the 1601 level. On the downside are the levels: 1512.5 and 1450 levels.

The case for the yellow metal

News abound calling the end of a historic bull run in gold.. The news of Dennis Gartman, one of the world's best known commodities traders indicated he had liquidated his positions - a shocking revelation as he was one of the few who had signalled the start of the bull run in gold through much of its run. Gold broke through, on Dec 14th, its 200 day moving average. For some technical analysts: a break below the 200 day moving average meant a breach of the last line of defense. And for traders who make rapid decisions on a short term fluctuation, the three most important indicators are the 20 day, the 50 day and the 200 day moving averages. For starters, the 20-day, the 50 day and the 200 day moving averages are now definitively pierced and the same conclusion still holds from my earlier post. That is a signal to sell. The next support seemed to come in at around $1400. However not everyone agrees. That position comes from the dim view of European saga as well as the US's financial woes. So what could the average investors do? Well, you could dollar cost average. You sell some of the position now and then buy more, if the price continues to fall more. The bottom line is : never make decisions based on emotions. For more information on this, please refer.

Au down trending channel shown

An important support at 1700 thereabout. Technical Analysis shows: if that gives way, it would drop deep into the 1575 cross-line. This down trend is formed amidst the chaos over at Europe, interestingly.

Gold dipping.. : )

Amidst the news of Europe and US, spot gold and U.S. gold futures dropped more than 1 percent on Monday after the U.S. dollar rallied against the euro. This is due to the influx of Europe's never-ending woes..(that of Greece's possible default)..And US dollars benefitting from it. The euro dived to a seven-month low against the dollar and a 10-year trough versus the yen, falling below key technical levels. Continued weakness is expected.. The morning showed all markets including asian bourses were basically slaughtered..

Gold and whereabouts

From previous writings, gold has in general mantained still at 1800+ level.. A previous dip was marred by the on-going US job employment data as well as the Europe crisis. However, gold has not broken the $2000 level though it came pretty close. Price level should weaken, barring any unforseen sudden bad news in either the US/Europe duo. Commodities should generally do well in the near future, though oil has retreated. US dollars is still on a long term bear.

Gold and Silver testing new lows..

Gold went on a downhill and appear to test our first level of resistance at 1450 - as mentioned in my previous entry. Silver likewise appears to go downwards as well. The confirmation of the downtrend could come these two days. As for the rest of the commodities as well as the broad stocks, wild fluctuations would occur - and looks like it will be a norm.

I wonder..

Precious metal is still in the middle of a correction that has long been overdue. Like metals, oil has somewhat subsided but still remains in a long term bull as fundamental problems have yet to be remedied. Long term outlook for U.S remains on the negative. There are too much optimism around that weighs much more than real fundamentals giving the hope that US or Europe economy has rebounded. And to add to that, Egypt's woes just added to the whole cauldron of Europe- US misfortune. The risk for a sudden drop certainly exists now - at much higher chances.

On the Asian side, problems of rising housing prices as well as a "bigger currency versus that of US" do abound. This will not be good for Singapore, of course, but may well make China a winner-- whose bigger currency could buy them more things and hence lift the entire economy to a new level.

Gold trading in zombie land..

Gold is starting to correct. Unlike the metal itself, blue-chip gold stocks have delivered an average annual compounded return of about 12% over the past 50 years. And they’re not correlated with the broad market, which gives your portfolio higher returns with less volatility.
But gold has more than tripled in the past five years. Some say it is a myth that the Fed is printing money. And hence, the amount of currency in circulation is not changing. That The Fed is buying Treasury securities to lower long-term interest rates and stimulate the economy. There is also an additional problem with projecting Gold Price. Since Gold doesn’t pay interest like bonds. It has no earnings or dividends like stocks. It can’t house you or provide rental income like real estate. So there really is a projection problem when it comes to where gold should be trading. .. or so, it seemed.

Well- I beg to differ... in my opinion, the long term trend still looks pretty.

One step at a time

Most Asian stock markets fell on Wednesday - most likely due to ongoing worries about Europe's debt problems. Coupled to that, a disappointing growth story from Australia. On the other hand, most commodities like Gold and Silver registered an upward climb today confirming the upward trend. USD seemed to benefit from Europe's saga.

On the state of economy now ..

Gold appears to weaken, though the trend is still somewhat upwards. Singapore properties, by and large, has corrected alittle if COV is to be taken into account. But then again, this only applies to HDB. Demand for Private Properties remains high. It is quite likely that interest rate be raised in future and that would definitely impact the demand still further.. as well as affecting current owners.

Gold explodes further after election results..

In my opinion, US dollar will continue its long term bear with the latest round of qualitative easing though this has the effect of raising STI , DOW levels as never before. However, this will ultimately cause contra dollar assets to rise. Gold broke through trend-line at 1370 signalling more to come.. though a short term correction definitely seemed possible. The next one to two weeks will be interesting as there will be more action, more sideway moves.

Vacillating moves by commodities

Gold retreated into an unsteady fluctuation range from 1320 to 1340. Seems to be heading downwards in the short term. Similarly, commodities are also showing some form of fluctuation. All depends on how 2nd Nov election will turn out.

On future trends

Commodities are on the run with Gold and Silver continuing on its uptrend. A correction seems possible but it remains healthy nevertheless. Its upward trend-line is intact - largely for reasons mentioned in previous blog-entries. As for developments covering Singapore properties: with the recent Government intervention, Private housing demand remain capped under pressure. But it is expected to remain strong and rise marginally due to increased demand both from overseas or local buyer trapped out of the hdb market. As for public housing, demand again will remain strong but will be in check.

Another Sign of Long Term Trend

As if in confirmation over what was mentioned in blog entries these few months, the Singapore dollar rose against the US dollar. Some analyst claimed that this currency boost is due to a return of risk appetite on better US housing data and jobs data. It might be .. But in my opinion, this currency boost is more likely attributed to the gradual but sure depreciation of the US currency. As long as the present Easing policy continues, you can be sure that the US dollar on a long term basis does not look too good. Asian currency will by and large be expected to strengthen against the US dollars. These are interesting times..

The local unit at one point traded at 1.3419 to the US dollar, topping the previous high of 1.3438, said Suresh Kumar Ramanathan, regional rates and forex strategist at Malaysian bank CIMB in Kuala Lumpur.